Yesterday we wrote about how SCE’s residential customers who take service under the Domestic rate structure could see their bills rise by 12% or more starting with their June bills, and we warned commercial customers not to get complacent about their own bills. Today we drop the other shoe: GS-1 and GS-2 customers, the bad news starts now.
SCE’s commercial customers (what it refers to as general service, hence the “GS") are largely divided into two groups: those that pay only for monthly energy usage (GS-1) and those that pay for both usage and peak power demand charges (GS-2). You can use all the energy you want in a month, but as long as your peak power demand never exceeds 20 kW you will stay in GS-1. Once your demand sneaks past 20 kW however, you will be assigned to paying higher bills under GS-2.
Solar for GS-1 users is a no brainer, just as it now is for SCE’s residential customers. For GS-2 customers, however, the question is a tougher call since it can be very hard to know how well solar will coincide with a potential client’s peak power demands, and it is those demand charges that so drive the pain of GS-2 bills. Neither GS-1 nor GS-2 are tiered, meaning that every kWh of energy is charged the same. Under GS-2, however, demand charges are significantly higher during the summer than they are the rest of the year.
We said that you could use all of the energy you like and remain in GS-1 but that’s not strictly true—if your peak power demand stays below 20 kW you can only pull so much energy into your site. Let’s imagine a commercial entity that is right under that limit: say 19 kW peak demand and they sustain that demand for 10 hours a day, every day. The remaining 14 hours their demand drops to just 5 kW. Their daily usage averages:
Usage = 10*19 + 14*5 = 190 + 70 = 260 kWh/day.
Under the old rate, this maxed-out GS-1 customer would have seen a bill of $15,355 or roughly 16.2¢/kWh. (A bargain, by the way, compared to what a residential customer using that much energy would have paid.)
Under the new rate, their bill jumps to $16,777 an increase of 9.26%, and now they are paying 17.7¢/kWh.
We recently provided a proposal to a potential GS-2 client, so we will model their usage to demonstrate what the new rates will do to a GS-2 customer’s bill. Their usage has peak demands that average 119 kW per year, but spike as high as 167 kW during the summer. Their daily energy usage is substantial as well, ranging between 600 and nearly 1,000 kWh per day from winter to summer.
Under the old rates, they were paying some $56,873 or 21.73¢/kWh. The new rates will see their bill climb to $59,598, and increase of 4.79%, averaging 22.77¢/kWh.
But here’s the interesting thing about the new GS-2 rate: it is actually more beneficial to solar customers, since the increase is mostly in the per kWh charge. Indeed, when we model our potential client’s savings in Year 1 under the new rate as compared to the old, it increases by over $1,000—going from $14,808 to $15,818, a 6.8% savings increase for no additional out-of-pocket expense! Their payback now occurs in Year 6 instead of Year 7, their IRR increases from 12.2% to 12.9% and they will have saved an additional $12,000 in Year 10 than they would have under the old rates. (Combine the solar power system with intelligent storage and you are really on to something.)
SCE’s rates are going up for all classes of customers that we see: residential (12%+), small commercial (9%), and large commercial (4.8%). Solar can help all of these customer classes, and GS-2 customers can see an even greater savings from solar under the new rates than they could before. Oh, and SCE still has some rebate money for commercial projects, but that won’t last for long.
Stop suffering, start saving—make this the summer you go solar.
One of our astute readers contacted us to ask if we had noticed that SCE had just increased their rates—and dramatically. That got our attention so we decided to spend some quality time amidst SCE’s tariffs. The news is mixed: terrible news for people who are going to have to pay these crazy rates, but great news for everyone who can install solar. In fact, SCE’s new domestic rate is about all anyone would need to be convinced to finally make the switch to solar.
In case you did not know it, every SCE tariff—that is, the rate structures under which they bill their customers such as the Domestic tariff for most residential customers or GS-1 and GS-2 for most commercial customers—can be found on their website. If you know where to look. (Hint: look here!) Of course, when you do find what you are looking for, you are rewarded with something that looks like this:
This is one half of SCE’s Domestic rate (the delivery portion)—and this is about the simplest rate structure that they use! So it is not surprising that most normal people don’t really examine these things to see what is going on—they just groan and pay the bill.
But we suspect people will do more than groan when they look at their bills this summer.
We had been working on a solar proposal for a prospective client in SCE territory when we learned about the rate change. The client’s usage was relatively high, averaging 55 kWh/day over the course of the year; high, but still far lower than some of our clients. Under the rate structure in effect prior to June 1, this client’s annual bill worked out to $5,100 but after applying the new rates her annual total jumped to $5,750—an increase of a whopping 12.7%!
We will pause a moment to let that sink in.
What about that other potential client we wrote about, the one whose SCE bill already contained an incredibly misleading chart purporting to help her understand her bill. What impact will these new rates have for her? Under the rates in place before June 1, her total bill for the year was an already eye-popping $8,435—ouch! But under the new rates? Her new bill becomes $9,560—an increase of 13.4%!
So what is actually going on here? Turns out that the rates on the high end, Tiers 3 and 4, are the culprits, increasing by 16.4% and 14.8% respectively. Live in Tier 4 this summer and you will be paying 34.8¢/kWh for the privilege!
There is a silver lining here and that is that adding solar pays off better than ever. If your solar power system gets you out of Tier 4 alone, you will save thousands of dollars a year. For our prospective client who averaged 55 kWh per day, her savings come to $4,171 in Year 1. Even without a rebate from SCE (which for now at least has gone the way of the Dodo), her payback is in Year 5! After 10 years, thanks to these new rates, she will have saved an additional $25,000! And by avoiding a lease (this client is planning on using HERO financing), those benefits all go to her!
We have said it before and we will say it again: utility rates are only going up. While this example pertains to just SCE’s residential customers, guess what? You commercial customers are about to see your rates go up as well (more on that soon). And muni customers, now is not really the time to feel smug as your rates are going up too (and yes, PWP folks, we mean you!).
Give us a call and let’s see if we can’t help—contrary to the song, we’ve got a cure for these summertime blues!
We have looked at a lot of electric bills.
Pretty much every potential client that we speak to sends us a year’s worth of their electric bills as the first step in the process of getting a proposal for adding solar to their home or business. We use that data to model what your actual savings will be, based on the rate structure that the utility applies to you as their customer. Some of those rate structures are really complicated (like this time-of-use rate for EV charging), but for most residential clients, the rate should be relatively straight forward. After all, you are only paying for total usage (not demand charges) and most folks aren’t yet on a time-of-use rate. How complicated can it be?
But we had a bit of an epiphany the other day as we tried to explain an SCE bill to a couple at their kitchen table. Perhaps you’ve noticed this little chart if you are an SCE customer:
Presumably this is SCE’s attempt in helping you to understand your bill. So what is going on here? SCE residential customers are under a tiered rate structure. The lowest tier, the so-called baseline rate, is relatively cheap at roughly thirteen cents per kilowatt hour for the first few hundred kilowatt hours needed. Of course, no one uses just their baseline allocation and so the second tier is a tiny slice that is 30% of the baseline. If you stay in those first two tiers, congratulations, you are getting some pretty cheap energy.
Tier 3 is where things start to get pricey, with the cost per kilowatt hour doubling from what you paid for baseline. Tier 3’s allocation is 70% of baseline, which mean that if you use more than twice your baseline allocation, you are out of Tier 3 and into the dreaded Tier 4 where you will pay more than 31¢/kWh.
Ok, so far so good. But notice the odd thing that is going on in that graph. The widths of Tiers 1-3 are actually proportionate to reality. The width of the bar for Tier 1 is equal width to the sum of the bars for Tiers 2 & 3— which is exactly how the rate structure works. But what is going on with that bar for Tier 4? At a quick glance, you might think that you are using about the same amount of energy in Tier 4 as you did in Tier 1 (or Tiers 2 & 3). But look at the number: whereas Tier 1 was 399 kWh, the usage in Tier 4 is more than four times that amount at 1,799 kWhs! This client is living in Tier 4!
This is not only not helpful to “understanding your bill,” this is downright deceptive.
So what should this actually look like if drawn to scale? How about this:
Now the true impact of this client’s high energy usage starts to become clearer. Their usage is dominated by Tier 4 but you never would have seen that relying on the chart provided by SCE.
Of course for most clients, they are more interested in what they are paying, and it is here that the real impact of SCE’s tiered rate structure comes home. Check out this chart:
Wow - this client is spending 10x as much on Tier 4 as they are on Tier 1! That is some painful energy costs right there!
To be sure, if you review your bill carefully, you could find this same information, but the bill obscures the facts by parsing out the numbers in a manner that only makes sense to the lawyers who crafted the rate structure (and those of us who have made it our business to decipher them).
We have a suggestion to our friends at SCE—if you really want to help your customers understand their bills, start by ditching the misleading charts and replace them with a clear representation that makes the facts readily understandable.
In the meantime we will continue to do our part, one kitchen table at a time.
SCE has devised an extremely complicated rate structure designed for residential customers who drive electric vehicles. Instead of having a separate meter for EV charging, this rate structure is designed to replace the Domestic rate and apply to the entire household’s energy use—presumably at a savings. But does it? What we discovered may come as a shock…
SCE has long offered a rate structure that was designed for separate meter charging of EVs. But as more and more people acquire EVs there were relatively fewer consumers looking to go through the hassle of installing a separate meter just to charge their EV. SCE’s combined household and EV charging rate, known by the unmelodious monicker of TOU-D-TEV ("EV Rate,” for short), is designed to provide a lower-cost option for customers who were previously on SCE’s standard, Domestic rate structure.
As the acronym implies, the EV Rate is a time-of-use rate structure which means that what you pay for a kilowatt-hour of energy is directly tied to when you use it. There are three time classes: On-Peak (weekdays, excluding designated holidays, from 10 a.m. to 6 p.m.), Super Off-Peak (everyday, midnight to 6 a.m.) and Off-Peak (all other times). In addition to the time of use component, the EV Rate includes tiers. While Domestic rate customers are used to four tiers at which energy gets progressively more expensive, the EV Rate has only two tiers. Put this all together and you have the potential to pay wildly different amounts for your energy, as this table shows:
Stay within Level 1 and use your energy during Super Off-Peak and you pay just 9.4¢/kWh. But make the mistake of using energy during the middle of the day in the summer in Level 2 and you will be pay a shocking, 46.4¢/kWh! Yikes!!! Sure hope you aren’t at home during the day running your A/C.
EV owners are not required to take service under the EV Rate structure (at least not yet), so why switch? SCE advises customers that they can save money using this rate and we wanted to see if that was really true. We decided to model two different users and see how their bills would change between the Domestic rate and the EV Rate. The first user, our “average” user, consumes roughly 1,000 kWh per month (probably on the low end for most EV owners), or a little more than twice the baseline allocation. The second user, our “large” user, consumes more like 2,500 kWh per month and reflects a large home with heavy A/C use.
Let’s start with the average user:
This graph compares what our average user would have paid under SCE’s Domestic rate (the constant, orange line) against what she would pay under the EV Rate (the blue line) as a function of what percentage of the total monthly usage occurs during On-Peak hours. (Throughout we assume that 20% occurs during the Super Off-Peak hours of midnight to 6 a.m., and the balance occurs during Off-Peak).
Under the Domestic rate, our average customer would pay $3,200 for the year. If she manages to keep her On-Peak usage down below 30% of the total energy consumption, she will save money—as much as $355 or 11% off her bill, if her On-Peak usage is jut 5%.
But those “savings” can quickly disappear if she isn’t careful (or her children aren’t). Let her On-Peak usage climb to 60% of her bill and she will get hit with a 12% penalty and end up paying $388 more than if she had not switched.
What about our “large” user, how does he fare?
Most likely, better.
While his overall bill is much higher—he would be paying $8,500 on the Domestic rate—his potential savings versus penalty comparison is much more forgiving. He can save as much as 13% ($1,100) compared to a penalty of only 6% ($478). Plus, his breakeven point is higher, as he doesn’t start losing money until his On-Peak usage gets to 45%.
(This actually continues a trend with SCE’s residential rates where increases are highest at the lowest end of usage and the very highest users are actually getting a bit of a break. What an odd sort of mixed message.)
Bottom line—it is possible to save money, even significant money, if you are very careful about when you use energy.
Most EV’s are designed so that you can program them to charge during off-hours and anyone under this rate structure would absolutely want to insure that they use that feature. Indeed, there may be other energy users that could be similarly re-programmed such as pool pumps, dishwashers and washing machines, to run during the Super Off-Peak window. Unfortunately, it is very difficult to avoid running your A/C during the day if anyone is at home from 10 a.m. to 6 p.m. on weekdays—and doing so could be very expensive.
It should be obvious, but adding solar to the mix here could be huge since On-Peak hours directly coincide with the greatest production from a solar power system. Put most simply, if you own an EV and are considering making the switch to this EV rate structure, you need solar.
When Governor Brown signed AB327 last October, one thing was clear: net metering as we presently know it was going to go away, we just didn’t know how soon. Now, thanks to a ruling yesterday by the California Public Utilities Commission (CPUC), we know: 20 years. Here’s the scoop.
Around the country, utilities have been pushing hard against net metering—the tariff under which solar customers receive credit for surplus energy production (say during the day when no one is home or on a weekend when a commercial facility is dormant) that offsets energy consumed from the grid (for example, at night). The solar customer’s bill reflects the “netting out” of those two quantities (total energy exported versus total energy imported from the grid) and the customer only pays for the difference. If the solar customer is a net energy producer (quite rare), the utility has to cut the customer a check for the surplus. (Unless you are an LADWP customer, sorry.) Last year’s bill sought to end the squabbling and provide certainty to solar customers.
Under the law, the CPUC is required to devise a replacement for the current net metering arrangement, but yesterday’s ruling does not disclose what that will be. Instead, the ruling establishes a sundown provision for customers who are either currently, or will become net metering customers under the current rules before July 1, 2017 (at which time the present net metering rules will be closed to new participants).
Solar system owners will be entitled to operate their systems under the net metering rules for a full 20 years from the year in which they interconnect their system. That, decided the CPUC, will provide sufficient time for solar customers to recoup their investment. However, solar customers can transition to the new rules, whatever those may turn out to be, sooner at the customer’s election. The year of interconnection is determined by the date on the Permission to Operate letter received from the utility, and the twenty-year term ends on the last day of the twentieth year.
What happens to systems that are modified after July 1, 2017? Does the new portion of the system get its own 20-year net metering extension or is it simply subsumed into the term for the original system? The CPUC split this into two possible scenarios: repairs or modifications that did not increase system capacity by more than 10% of the original design will operate under the original 20-year term, neither resetting or ending it. But system changes beyond the 10% limit will either have to be metered separately, or the entire system will have to be transitioned to the new tariff structure.
The next question to be resolved was what happens if the system is sold or relocated? After all, many solar customers purchase systems expecting it to increase the value of their home—but if the sale eliminates the net metering agreement, that added value could be lost. The utilities, of course, disdained any such concerns, arguing that the net metering term should be tied to the original owner only.
Fortunately, the CPUC sided again with solar system owners. Thus, systems will remain under net metering for the full twenty-year term, regardless of changes in ownership, as long as the system remains at the original location. However, if the system is physically moved to a new location, the CPUC deems that to be a new interconnection and the old net metering agreement would no longer apply.
The decision yesterday also took an important step in addressing the impact of adding energy storage systems to an existing solar system operating under the twenty-year net metering rule. The CPUC ruled that “to the extent that energy storage systems are considered an addition or enhancement to a renewable electrical generation facility utilizing a NEM tariff, we find that they should be treated in the same way, and subject to the same transition period, as the underlying renewable generation system to which they are connected.”
The July 1, 2017 deadline is an absolute cutoff, but the actual end of new net metering agreements can actually be reached sooner if the utility in question has reached its “net metering cap.” The CPUC previously set the cap at 5% of the utility’s “non-coincident aggregate peak load.” To allow perspective solar customers to know if their utility is going to hit that peak before the July 1, 2017 deadline, the CPUC ordered the three IOUs to report to the Commission (and on the utility’s website), on a monthly basis, their progress toward that cap.
Finally, the ruling addressed whether solar installers should be required to provide prospective clients with disclosures about the ruling, specifically as to the duration and limitations on existing net metering agreements. According to the decision, IREC and SEIA opposed such a requirement on the grounds that it exceeds the authority of the CPUC. As a legal matter, that may well be true, but SEIA’s position strikes a sour note. Frankly, the solar industry is in serious need of mandated, standardized disclosures on everything from system components, warranties, energy yield, true costs, etc., to say nothing of issues surrounding the changes to net metering. SEIA should be producing model documents for its member installer companies to use and drafting model legislation to mandate their use.
In any event, the CPUC punted the requirement issue for installers, saying:
Solar installers have a legal [citing Business & Professions Code § 17500] and ethical responsibility to disclose to their customers the terms that will apply to renewable distributed generation systems for the foreseeable future, including the applicable tariffs as well as the timing and terms for transition to a successor tariff. Such disclosures provide customers with the information that they need to make educated decisions about their future electric service. Because of this, we expect solar installers to provide honest and complete disclosures on the NEM transition, and we encourage customers to report to the appropriate authorities any misleading or fraudulent information that may be provided to them. At the same time, we require the large IOUs to post information on the NEM transition clearly on their Web sites along with other information about NEM terms, eligibility, and progress towards the statutorily mandated transition trigger level.
Of course B&P section 17500 is entirely generic and provides no guidance as to what disclosures solar companies should provide to their potential clients. Clearly this is an area that requires legislation and California, as the most mature solar market in the country, should be leading the way here.
As for Run on Sun, we will revise our Return on Investment materials to reflect a 20-year window instead of the 25-year model we have used previously. Hopefully that will provide clients with a more accurate estimate of their true ROI.
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